International news

Hollande ousts Sarkozy in French vote

Muddled Greek parliamentary vote may steal spotlight

By

WilliamL. Watts

Reuters

Francois Hollande, Socialist Party candidate for the 2012 French presidential election, holds his ballot in the second round vote of the 2012 French presidential election at a polling station in Tulle on Sunday. .

FRANKFURT (MarketWatch)—French President Nicolas Sarkozy on Sunday became the latest in a long line of European leaders to lose his job in the wake of the euro-zone debt crisis, conceding defeat to Socialist challenger François Hollande after polls closed in the final round of France’s presidential election.

Hollande, 57, said the vote marked a turn against a focus on austerity in response to Europe’s long-running sovereign debt crisis.

“Austerity is not an inevitability,” Hollande told supporters in Tulle in central France, saying the election marks a “new start” for Europe.

“This election is a rebuke to Germay’s austerity-focused approach to managing the euro zone crisis,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy, in London.

Sarkozy, also 57, speaking to cheering supporters in Paris, said he took “full responsibility” for the defeat, saying he had done his best during his five-year term to “protect” the French people.

An updated estimate put Hollande’s share of the vote at 51.9% versus 48.1% for Sarkozy, according to cable news channel France 24.

French expats cast ballots

(2:02)

French nationals living abroad cast a ballot in the second round of presidential elections. Video: Reuters/Photo: Getty Images

Hollande will be only the second Socialist to win the presidency since the advent of the Fifth Republic in 1958.

Hollande, while vowing to balance the nation’s budget by 2017, a year later than Sarkozy, also pushed back against calls for austerity in France and across the euro zone.

Strategists said an Hollande victory has largely been factored in by financial market participants, but warned that nervous investors could make for turmoil ahead of parliamentary elections that will take place in June.

French equities have underperformed European peers, and the yield premium demanded by investors to hold French bonds over German debt has risen over the past two months as surveys consistently pointed to a likely Hollande victory.

Sarkozy, who came to power in 2007 on a pledge to revamp the French economy, was unable to overcome voter angst amid a long-running sovereign debt crisis that has heightened worries over the country’s economy.

France lost its AAA credit rating earlier this year from Standard & Poor’s, while unemployment stands near 10%.

Sarkozy’s campaign initially emphasized his close ties with Merkel and efforts to recast the French economy in a more German image. After failing to gain traction, Sarkozy’s campaign moved to the right, emphasizing pledges to limit immigration.

But economic issues remained at the top of voter worries, surveys showed.

Sarkozy joins a growing fraternity of European leaders turned out of office since the euro-zone debt crisis emerged in 2009, joining the likes of Italy’s Silvio Berlusconi, Spain’s Jose Luis Zapatero, and other euro area heavyweights. Outside the euro zone, leaders such as Britain’s Gordon Brown have also fallen as voters react to economic turmoil following the 2008 financial crisis.

Meanwhile, worries over Greece may steal the spotlight when financial markets open on Monday.

Greek voters, angry over a devastating recession that has pushed unemployment above 20%, also went to the polls Sunday in parliamentary elections. Exit polls indicate the country’s mainstream center-right New Democracy party and the center-left Socialists, known as Pasok, took a drubbing. Both parties have backed the terms of the country’s second bailout, which require Greece to approve additional austerity measures by midyear.

New Democracy is seen as likely to remain the top vote-getter at around 20%, while Pasok is projected to come in third with between 13% and 14% of the vote, Bloomberg reported, citing exit polls.

The two parties won a combined 77% of the vote in elections less than three years ago, according to Dow Jones Newswires.

The far-left, anti-bailout Syriza party is seen coming in second with as much as 17% of the vote, according to the exit poll, which was conducted for state television, the report said.

If New Democracy and Pasok fall short of the combined 151 parliamentary seats needed to form a coalition, fears will rise that Greece could reject the hard-fought bailout, again raising the specter of a chaotic euro exit, economists said ahead of the vote.

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